We run a small dance school and have a question relating to sales that span 2 tax years. We offer monthly payments on costume purchases for our annual show. Our show is in November so we offer 7 monthly payments starting in February 2019 and ending August 2019. We issue 1 invoice for say £70 payable in 7 monthly payments of £10.

The invoice category is “Costume Sales” and the payments are paid into “Cheque account”. When we run a “Profit and Loss – Simple” report the Costume Sales does NOT show the income of February and March as “Costume Sales” because the invoice payment date is the FINAL payment date (Due date) of August 2019.

Short of issuing two invoices 1 for March 2019 and 1 for August 2019 we can’t see how to get the costume sale payments in the correct year.

Please can you advise of the correct procedure for the Solar Accounts system.

Thank you Ann Brown

Hi Ann,

It sounds the invoice for £70 is dated in February 2019 - is that correct?
Also, when does the customer actually receive the costume - is that also in
February 2019?

Yes it’s dated February with a due date for completion of payments by August. The costume is received when all payments are made.
Many thanks
Ann

Hi Ann,

>From an accounting perspective the sale is actually made when the customer
receives the goods - ie. in August. The payment made before August should
be treated as advance payments - in Solar Accounts, create a Money Received
transaction with the Type set to Advance Payment. When you record the
invoice in August, Solar Accounts will ask if you want to allocate the
advance payments to that invoice - click 'Yes'.

Hi Mark,

I understand what you have said from an accounting perspective but we are talking about a situation from a tax perspective. Two of the payments were made in last years tax period (ie February £10 and March £10) and the remaining 5 payments (for April £10, May £10, June £10, July £10, and Aug £10) were made in this years tax period, When doing the "advance payments" method you suggest does not show the £20 on the "Profit and Loss - Simple" report for "Costume Sales" for last years tax. It shows all the £70 payment in this years report for "Costume Sales" because the invoice due date is August 2019.

We are working on a "cash basis" which means we pay tax based upon when we receive payment not when we deliver the costumes. It seems that the only way around this problem is to issue 2 invoices 1 for £20 ending April 5, 2019 and 1 for £50 ending August 31, 2019. Is this correct?

Many thanks
Ann.

Hi Ann,

Yes you could issue two separate invoices. Alternatively you could simply
make a manual adjustment to the figures as you copy them from Solar
Accounts to the annual tax return form.

Thank you Mark for all your help it is much appreciated.
best wishes
Ann

Hi,
I have a another question for you. This question is regarding "Personal Use and Drawings". Which category should is be listed as, Assets, Liabilities, Equity, Income or Expenses? I have it under Expenses but when I request a "Profit and Loss - Simple" report I have to remove it from the expense column to calculate my profit (Total Income minus Total Expense) then add Personal Use and Drawings to that calculation to get my TOTAL Profit.

Am i following the correct procedure?

Thanks Ann

Hi Ann,

Personal Use and Drawings should normally be categorised as an Equity
account. Unfortunately in Solar Accounts you cannot simply change the type
of an existing account - you will need to create a new account with Type
set to Equity. Then edit your existing transactions to refer to the new
account instead of the old one.

Thank you Mark.